SC among states in federal investigation of illegal luxury car exports

Thursday

Dec 12, 2013 at 9:43 PM

Federal agents in several states — including South Carolina — are investigating illegal luxury car exports that auto manufacturers claim are undermining the vehicle value and volume positioning in American and foreign markets.

BY TREVOR ANDERSONtrevor.anderson@shj.com

Federal agents in several states — including South Carolina — are investigating illegal luxury car exports that auto manufacturers claim are undermining the vehicle value and volume positioning in American and foreign markets.So far, Secret Service agents have seized luxury cars, including BMWs, Audis, Ferraris and Porsches, and millions of dollars from bank accounts that agents claim have been used to illegally sell vehicles in foreign markets by circumventing the legal export process. According to an affidavit filed in federal court, auto manufacturers have contracts with U.S. dealerships allowing domestic-only car sales and transactions and specifically prohibit international sales. If vehicles are illegally exported, it causes financial problems for manufacturers, the documents state.BMW Group U.S. business spokesman Kenn Sparks confirmed the company is cooperating in the investigations."The BMW Group has been working closely with federal authorities for almost two years to stop illegal exports of our vehicles from the U.S. Illegal exports deny legitimate customers here in the U.S. of popular vehicles which are in high demand, such as the X5 and the X6, and the overseas purchaser ends up with a U.S. spec vehicle with no warranty — a bad situation at both ends," Sparks said in a statement. "The BMW dealer agreement forbids the sale of vehicles to brokers or for export."In cases of illegal exporting, foreign brokers receive orders for specific cars or car types from potential buyers. The brokers then use the Internet to find "straw buyers," or people who use broker funds to buy the cars in exchange for small profits. The straw buyers then purchase the cars from dealerships, which are not told the vehicles will be exported, and the cars are then taken to ports and transported overseas, according to court documents. To have vehicles shipped through customs, individuals submit false information on the shipping declarations.The court documents state that a high-end vehicle, such as a Mercedes-Benz, Porsche or BMW, will triple its value overseas, so a car valued at $100,000 will be sold for $200,000 or $300,000 in a foreign market."Shipping two containers containing four vehicles a month would net well over $400,000 income in international markets, based upon the illegal smuggling of vehicles manufactured for sale inside the United States," an affidavit states.South Carolina car dealers told a Secret Service agent that auto exporting is such a problem that dealers feel like they need to "act as the police" because nothing is being done to stop the practice.For example, one group involved in the scheme shipped 199 vehicles — valued at $11 million — to Hong Kong and China from March 1 to April 23.The business is profitable, for instance, because the Chinese government limits and places a 100 percent tariff on foreign-made cars such as BMW, Mercedes and Porsche, that are imported for sale in China. In 2013, the Chinese government specified that only 100,000 BMWs could be imported for sale. The Chinese government will sell 80,000 licenses to import to authorized dealers and sell licenses for the other 20,000 to individual customers. Chinese dealers only sell BMW sedans — not X5s, which are manufactured at the Spartanburg County plant — so brokers buy the high-demand SUVs from the U.S. and export them to China for resale, the documents state.Also, buying a car through a traditional dealer in China takes several months of waiting, so hiring a broker to illegally export the cars typically allows an individual to get the vehicle he wants more quickly and at a lower price, according to court documents.It's unclear whether those involved will face criminal charges because the investigation is ongoing in South Carolina, New York and New Jersey.

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